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59 referrals why employee referral programs should be your #1 hiring source slideshare (1)

  1. 1. WHY EMPLOYEE REFERRAL PROGRAMS SHOULD BE YOUR #1 HIRING SOURCE Making the business case 2014 © Dr John Sullivan Read more at 1
  2. 2. Why the increased emphasis on referrals? Referrals will continue to become even more prominent because of: More data proving their business impact More firms are shifting to a data driven approach which makes their ERP’s much more effective The growth of social media and the Internet make it easy for your employees to find top talent The visibility of prospects work on the Internet New technologies are available New vendors appear every day 2
  3. 3. Part I The business and recruiting impacts of referrals 3
  4. 4. The 1ST step is building a compelling business case Here is a list of the business impacts from referrals 4
  5. 5. Business impact #1 – High quality hires ERP’s produce the highest quality of hire Hires from referrals perform better on the job than hires from any other source Let’s look at 2 charts revealing source quality > 5
  6. 6. Referrals are the #1 source for new hire quality Source effectiveness Source effectiveness (out of 5) 1. Employee referrals 1. Employee referrals 3.44 2. Large job boards 2. Social networking sites 2.98 3. Niche job boards 3. Corporate career pages 2.75 4. Temp to perm 4. Internal job boards 2.52 5. Recruiters 6. Trade media 7. Staffing services 8. College recruiting 9. Career fairs 10. Co-op education 11. Mass media 12. Military Source: 2011 Source: Aberdeen Group 2013 6
  7. 7. Business impact #2 – High productivity ERP’s produce improved new hire productivity Referred hires from average workers produce 25% more output /profit… than non-referred employees Referrals from top performing employees produce 135% more output / profit 7
  8. 8. Business impact #3 – A high ROI Calculating the $ value and ROI of each ERP hire Start with your average revenue per employee Multiplying that dollar amount by the % of higher output produced by referral hires (25% up to 135%)…reveals each ERP hire’s $ impact on revenue At a struggling firm like Sears using the minimum increase in output of 25%, ($138,200 rpe X 25% improvement) this means that each ERP new hire is worth nearly $35,000 At a productive firm like Facebook, using the maximum 135% increase in output, each ERP hire could be worth up to $1.6 million  Compared to a probable cost per hire of less than $10,000 8
  9. 9. Business impact #4 – High retention ERP’s hires have a better retention rate Referred workers have a higher retention rate and are up to 30% less likely to quit their jobs 9
  10. 10. Let’s shift to recruiting impacts The superior recruiting impacts from referrals 10
  11. 11. Recruiting impact #1 – A high volume of hires The highest volume of hires - of all sources of corporate recruits, employee referrals are #1 in volume at between 24.5% and 44% of all hires An even higher volume occurs at top firms – at firms with excellent referral programs… 50% of all hires come from referrals (Twitter, Facebook and E&Y) and the top firms have reached nearly 80% Up to 8 referrals per opening – by assigning prospects to the right employees… you can get up to an average of eight referrals per position Let’s look at a chart revealing source volume > 11
  12. 12. Referrals are the #1 source for new hire volume Source popularity Volume 1. Referrals 24.5% 2. Career site 23.8% 3. Job boards 18.1% 4. Recruiter direct source 6.8% 5. College 5.5% 6. Rehires 3.3% 7. 3rd party 3.1% 8. Social media 2.9% 9. Print 2.3% 10. Temp to hire 1.5% 11. Career fairs 1.2% 12. Walk-ins 0.3% Source: CareerXroads 2013 12
  13. 13. Recruiting impact #1 – Hiring volume at top firms The best firms average 46% Source: yesgraph 13
  14. 14. Recruiting impact #2 – High quality applicants Higher quality applicants  A survey of 73 major employers… 88% said that… “referrals are the # 1 best source for above average applicants”  HR executives rated referral candidates #1, earning a 8.6 on scale of 10  Referrals also have the highest interview to hire ratio (17% of referrals are interviewed) 14
  15. 15. Recruiting impact #3 – A better hire ratio A much better hire ratio Although only 7% of applicants come from referrals, they produce 40% of all hires Between 14% to 25% of referrals are hired… Versus 1% from among all sources combined 15
  16. 16. Recruiting impact #4 – Time to fill Faster hiring speed / time to fill  A referral program can have the fastest “time to fill” of all sources (29 compared to 45 days) Source: yesgraph  “Blue light alert” referrals are the fastest of all referrals 16
  17. 17. Recruiting impact #5 – Low-cost Lower-cost hire  A well-managed referral program that doesn’t focus on the reward as a motivator produces hires at a lower cost than the average cost per hire at a firm 17
  18. 18. Not all referrals are equal Top-performing employees submit the highest quality referrals Referrals from top performing employees provide significantly higher quality referrals than the average worker (ttp:// The worst referrals come from “people that you don’t know that approach you” Relative strangers that ask you to “please make me a referral” produce the worst quality… 18 because you don’t know their work or skills
  19. 19. Part II What are the key elements that are present in top-performing referral programs? 19
  20. 20. What elements differentiate the top performing programs from the average ones? Key differentiator elements… ERP elements for increasing referral quality 20
  21. 21. # 1 - Prioritize jobs to focus on quality Focus ERP efforts on high priority jobs (40% max) Mission critical jobs Revenue generating jobs Key jobs in high profit and high-growth SBU’s Jobs with a high previous referral success rate Hard to fill or high-volume jobs “Sudden” key vacancies 21
  22. 22. #2 – Motivate using a “help the team approach” $ rewards can reduce the focus on quality & impact Use a “help the team" approach that emphasizes: It’s part of your responsibility as a team player An opportunity to work alongside great people and… you won’t have to work alongside slackers You will learn more from higher-quality new hires You will be recognized for “helping the team” Your team will “win” more frequently Providing this competitive advantage… will improve bus. results, stock value and bonuses Show employees the correlation between better business results… and a higher % of ERP hires 22
  23. 23. #3 – Use proactive approaches, not spamming Proactive means seeking out the best referrers It is true that “Great people know great people”, however… most employees are extremely busy… so in order to get quality referrals… you must proactively approach them Proactively approach the teams that have the hardest openings to fill… as well as your top referring employees Here are 2 proactive ERP tools to consider > 23
  24. 24. “Proactive” referral tools A) The “give me 5” approach (Google) Proactively approach top performers and ask them  To identify the top five people that they know in their field… in these categories The best performer you ever worked with The most innovative The best team player The best manager The best under pressure  Then ask your employee to contact these 5 individuals and try to convince them to apply 24
  25. 25. “Proactive” tools B) Reach out to job references for referrals  Identify top performing hires from last year  Call their references that said accurate things  Thank them  Ask them “Do you know anyone else as good?”  Ask them to be a future reference source 25
  26. 26. #4 - “Assigned referral” tools 4 Assigned referral approaches to consider A) Use a referral community - for each of its jobs, Accolo selects a few employees based on the likelihood that they will know the right person for a job opening… they average 8 referrals for every job B) Assign an individual with a strong connection – Zynga executives identify an important recruiting target and then select the employee that has the strongest social media relationship with them. That individual is then coached to make the referral 26
  27. 27. Another assigned referral tool C) Assigned boomerang referrals  Utilize your corporate alumni group to… identify top-performing alumni that work in high need areas and assign an employee to them (DaVita 16%) 27
  28. 28. Another assigned referral tool D) “Most wanted list” of assigned referrals  Executives identify… a list of gamechangers and potential “magnet hires” at the beginning of the year  Key employees are asked to seek out these highly desirable individuals and to build a relationship with them over social media  When they eventually agreed to consider becoming a referral… speed hiring is required 28
  29. 29. #5 - Require this information to ensure quality You must require these 6 pieces of information 1. The job title or req # you are referring them for 2. How / when you have assessed their work 3. Assess and then tell us about their skills and knowledge… and how they are superior 4. Assess and then tell us about their cultural fit… so we do not dilute our culture 5. Assure us that you have sold them to the point where they will accept an interview, if asked 6. Honestly rate them with a A+, A, or B+ 29
  30. 30. #6 - Clear expectations can limit junk referrals Set expectations before an employee refers 1.We are exclusively seeking superior individuals that will make our firm significantly better 2.Because we only want the very best… we expect no more than 3 referrals per employee a month 3.Throughout the referral process… we expect you to put the firm’s best interests first 4.Except in extraordinary cases, we do not want referrals from relatives or individuals that approached you and asked to be referred 30
  31. 31. Referral program success factors Look for people that  That have skills that you don’t  That beat you  That you learn from  That you admire  That can do things you can’t  That have answers  That are future focused  That see the glass as half empty
  32. 32. #7 – Great referrals require education & coaching Source: Whirlpool 32
  33. 33. #8 – A story inventory is critical A story inventory for recruiters and employees 33
  34. 34. An example - How to generate stories Microsoft “Spreadthelove” internal website Their “Spreadthelove” website allows Microsoft employees to "write up" their own individual story about their career with Microsoft (their story might include pictures, testimonials and video)  Employees can then share the web link and "spread the love" with targeted friends, family and potential referrals 34
  35. 35. Now let’s shift to actions that increase volume Actions for increasing referral volume and participation rates 35
  36. 36. #1 for volume – Responsiveness is essential Responsiveness is the key to continued success  The #1 volume reducing factor is a slow response  Dedicated recruiters – can improve candidate relationships and much more effectively sort and expedite top referrals (CACI) Develop service level timelines like:  Responding to all referrals within 24 hours  Offering at least phone interviews to A+ and A candidates within 5 days (Owens Corning) 36
  37. 37. #2 for volume – Everyone is a “Talent Scout” (Tata)
  38. 38. #3 for volume Focus on attracting “passive” prospects Here are 4 passive approaches to consider > 38
  39. 39. A) Referral cards can attract passives Your customer service just now was exceptional. I work for the Apple store and you’re exactly the kind of person we’d like to talk to. If you’re happy where you are, I’d never ask you to leave. But if you’re thinking about a change, give me a call. 39 This could be the start of something great.
  40. 40. Focus on passives B) Names alone can start the referral Pay $100… just for a name in key jobs… even if they are not hired (Must provide contact information, they must be someone working in the field and be interested in a new job at Children’s hospital in Dallas) 25% of the names result in a hire 40
  41. 41. Focus on passives C) Accept profiles – at least initially, allow LinkedIn profiles in lieu of the “slow to acquire” updated resume D) Look for great work online – encourage employees to seek out examples of excellent work on the Internet and convince those prospects to become a referral 41
  42. 42. #4 for volume – Expand program eligibility Expand eligibility to execs, managers and HR Executives are encouraged to refer - a “white glove treatment” recruiter can be assigned to encourage executives to make referrals (Deloitte) Managers and HR are made eligible – managers and those in HR are also well connected, so they should be eligible to make referrals (Accenture) Give it to charity – you can motivate those not driven by money and minimize conflicts of interest by offering the option of donating their reward to charity (Accenture, DaVita) 42
  43. 43. Expand eligibility Expand eligibility to non-employees Open up referrals to non-employees including Family Contingent workers Consultants and vendors Customers Board members Corporate alumni (Internosis, Clearlink, CACI, Verinon) 43
  44. 44. #5 for volume – Broaden ERP coverage Broaden referral coverage Add on-boarding referrals – proactively ask new hires for referrals during on-boarding (Eli Lily) Add college referrals – the college population is well connected through social networks, so add a referral sub-program for college hires and interns (Endeca, Intuit) Add referrals for executive positions – advanced ERP’s also cover openings for executive positions 44
  45. 45. 8 additional practices for increasing volume 1. Alerts – send targeted “I need your help today alerts” to the most relevant employees with a successful referral track record (CACI International and Quicken Loans) 2. Competitions – friendly internal contests between teams can dramatically improve results (Deloitte) 3. Hold referral events – hold physical referral events and “virtual hangouts” or “meet ups” in order to garner attention, to educate, and to get "spot" referrals ( 45
  46. 46. 8 practices for increasing referral volume 4. Harness social networks – closely integrate referrals with your firm’s social media effort 5. Develop professional learning communities and have your employees make referrals from the best participants (Microsoft) 6. Recognize managers – set targets, make it a promotion criteria and then… track, report, recognize and reward individual managers for high referral rates within their team 7. Ninja searches – periodically approach top employees and ask them to search their phone, social media and computer databases 46
  47. 47. 8 practices for increasing referral volume 8. Conduct a follow up interview – after a successful referral, send a recruiter to interview the employee in order to identify best practices and to ask for additional referrals (Amazon) 47
  48. 48. If you’re going to include rewards… utilize high-impact but low-cost rewards 48
  49. 49. Reward best practices Action steps for improving rewards  Realize that the average bonus amount generally falls between $500 and $1,500…amounts above $1,500 have proven to have little impact  The best ERP’s never pay "equal" bonuses and most vary it by job, location and competitor $  "Grossing up" bonuses (so that they are in effect tax-free) really WOW’s employees  Pay off quickly and consider a “prize patrol” approach to add excitement (Quicken) 49
  50. 50. Reward best practices Inexpensive rewards to consider  A referral dinner/luncheon held once/ twice a year with the CEO to celebrate referrers  A $25 gift / Starbucks card for your 1st referral  A handful of free movie tickets for the family  First choice at vacation, schedule or other desirable work items 50
  51. 51. 4 Final strategic program elements 1. Realize that a focus on diversity referrals will actually increase your diversity hires 2. Track referrals to identify the high and low referring teams 3. Notify employees when they make a particularly weak referral 4. Use referrals for internal openings 51
  52. 52. Part III What elements drag down the performance of average corporate referral programs? 52
  53. 53. Be careful Homer will refer people also 53
  54. 54. The 4 most impactful referral program killers 1.Do not allow executives to win the argument that… you don’t need a formal ERP program and a marketing effort… because “it’s part of their job” 2.Do not withhold rewards until the probationary period is over (consider an added bonus if they stay) 3.Avoid “referral spam” where a high volume of the same message causes your targeted employees to eventually ignore all referral messages 4.Avoid sending employee referrals to apply on your standard corporate careers website (not tagged) 54
  55. 55. And finally… Benchmark firms that you can learn from AmTrust Bank Deloitte Ernst & Young Edward Jones Accenture DaVita Aricent Twitter Facebook Accolo CACI International Acumen Solutions 55
  56. 56. Are you convinced of the power of referral programs ? 56